Healthcare Backlash Causes Heartburn at Red Lobster

What turned out to be a brief experiment by Darden Restaurants Inc. with a strategy to reduce the cost of health coverage mandated under the Affordable Care Act is causing red faces at the parent company of Red Lobster restaurants.

It’s no secret that many companies are pondering steps to avoid the costs of health coverage mandated as of 2014 by what’s commonly known as Obamacare. But Darden, and its main restaurant brands “were subject to a unique and sustained focus,” after word got out that it was considering cutting workers’ hours, CEO Clarence Otis Jr. said during a conference call today. (Part-time workers aren’t covered by the Obamacare mandates.)

As the WSJ’s Ben Fox Rubin reports today, Darden’s profits fell 37% for the quarter ended Nov. 25 compared to a year ago, mainly because sales at Red Lobster, Olive Garden and LongHorn Steakhouse restaurants fell a combined 2.7%. Darden has struggled to hit the right notes with its marketing and pricing coming out of the recession, and many of its problems relate to those business missteps, the WSJ’s Annie Gasparro has reported.

Critics of Obamacare used Darden’s initial experiment with cutting workers hours as an example of how the healthcare bill could backfire on workers. Now, Obamacare proponents are jumping on Darden’s troubles to argue that big employers are taking risks if they try to dump employee health coverage.

More of what Mr. Otis had to say is in the full post, from a transcript provided by FactSet:

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